Larsen, Inc., produces two types of electronic parts and has provided the following data: ...
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Accounting
Larsen, Inc., produces two types of electronic parts and has provided the following data:
PartX12
PartYK7
Total
Units produced
100,000
600,000
-
Direct labour hours
30,000
70,000
100,000
Machine hours
50,000
300,000
350,000
Number of setups
40
80
120
Testing hours
1,000
9,000
10,000
Number of purchase orders
500
3,500
4,000
There are four activities: machining, setting up, testing, and purchasing.
Required:
1.Calculate the activity consumption ratios for each product.
2.Calculate the consumption ratios for the plant wide rate (direct labor hours). When compared with the activity ratios, what can you say about the relative accuracy of a plant wide rate? Which product is under Costed?
3.What if the machine hours were used for the plant wide rate? Would this remove the cost distortion of a planT wide rate?
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